PURCHASE, N.Y., March 7, 2013 (GLOBE NEWSWIRE) -- MVC Capital, Inc. (NYSE:MVC), a publicly traded business development company that makes private equity and debt investments, today announced its financial results for the first fiscal quarter ended January 31, 2013.
First Fiscal Quarter 2013 Financial Highlights
- Interest and dividend income of $5.6 million, compared with $2.7 million in Q1 2012
- Fee and other income of $0.8 million, compared with $1 million in Q1 2012
- Net operating income of $1.0 million, compared with $1.3 million in Q1 2012
- Paid quarterly dividend of $0.135 per share; 31st consecutive quarterly dividend
"The sale of Summit, combined with the successful completion of our recent unsecured note issuance and subsequent retirement of our $50 million term loan, positions us to implement our strategy shift towards yielding investments. With these activities behind us, we can dedicate resources towards refocusing and building a portfolio of investments capable of offering a steady stream of income to sustain and seek to build our dividend over the long-term," said Michael Tokarz, Chairman and Portfolio Manager. "We are looking to prudently invest the capital we just raised. Our focus will continue to be towards investing in proprietary deals, which we have a successful track record of sourcing."
First-Fiscal Quarter 2013 Results
| (Unaudited) (in thousands except for per share data) | Q1 2013 | Q4 2012 | Q1 2012 |
| Total operating income | 6,386 | 6,148 | 3,644 |
| Management fee | 2,080 | 2,027 | 2,257 |
| Portfolio fees - asset management | 106 | 106 | 62 |
| Management fee - asset management | 232 | 140 | 388 |
| Administrative | 890 | 862 | 923 |
| Interest, fees and other borrowing costs | 937 | 886 | 795 |
| Net Incentive compensation | 1,175 | (1,410) | (1,937) |
| Total waiver by adviser | (38) | (38) | (96) |
| Tax expense | 1 | 3 | 1 |
| Net operating income before net realized and unrealized gains | 1,003 | 3,572 | 1,251 |
| Net (decrease) increase in net assets resulting from operations | 6,876 | (3,556) | (9,018) |
| Net (decrease) increase in net assets resulting from operations per share | $0.29 | ($0.14) | ($0.37) |
| Net asset value per share | $16.29 | $16.14 | $17.04 |
In the first quarter of 2013, the Company earned $5.6 million in interest and dividend income and $790,000 in fee and other income, representing an increase in total operating income of $2.7 million or 75% as compared to the same quarter in 2012.
The Company reported net operating income of $1.0 million for the first quarter, as compared to net operating income of $1.3 million for the same quarter in 2012. Net operating income for the quarter was impacted by the $1.2 million increase in the Company's provision for incentive compensation as a result of an increase in the valuations of certain portfolio companies. This compares to the $1.9 million decrease in the provision for incentive compensation that favorably impacted the net operating income results for the first quarter of 2012.
| Q1 2013 | Q4 2012 | |
| Active Deals: | Write up (down) | Write up (down) |
| Security Holdings, B.V. | $2,955,000 | $(2,959,000) |
| MVC Automotive Group B.V. | $2,180,000 | $(362,000) |
| Vestal Manufacturing Enterprises, Inc. | $1,650,000 | $1,750,000 |
| Custom Alloy Corporation | $840,000 | |
| Octagon Credit Investors, LLC | $450,000 | $700,000 |
| RuMe, Inc. | $423,000 | |
| SIA Tekers Invest | $234,000 | $139,000 |
| Turf Products, LLC | $180,000 | $271,000 |
| Pre-Paid Legal Services, Inc. | $118,520 | |
| Centile Holding B.V. | $90,000 | $(34,376) |
| MVC Private Equity Fund, L.P. | $11,965 | $(58,720) |
| NPWT Corporation | $(84,091) | $(465,000) |
| Harmony Health & Beauty, Inc. | $(100,000) | $(150,000) |
| Ohio Medical Corporation | $(350,000) | $(8,525,000) |
| Velocitius B.V. | $(1,054,000) | $2,452,000 |
| SGDA Europe B.V. | $(1,742,000) | $239,000 |
| TOTAL | $5,802,394 | $(7,003,096) |
First-Fiscal Quarter 2013 Portfolio Adjustments
As of January 31, 2013, the Company's net assets were $389.7 million or $16.29 per share, compared with net assets of $386.0 million, or $16.14 per share, at the beginning of the quarter and $407.6 million, or $17.04 per share, at the end of the same period last year. During the quarter, the Valuation Committee, which is comprised of three independent directors, changed the fair values of sixteen portfolio companies, resulting in a net increase of $5.8 million or $0.24 per share. In arriving at these determinations and consistent with the Company's valuation procedures and ASC 820, the Valuation Committee took into account many factors, including the performance of the portfolio companies, as well as the impact of changes in market multiples within certain sectors and fluctuations in currency valuations, particularly in the Euro.
Quarterly Investment Activity
During the quarter, the Company made no new investments and two follow-on investments in two existing portfolio companies, allocating $8.5 million of capital to JSC Tekers Holdings and Biovation Holdings, Inc. During the first quarter ended January 31, 2012, the Company made one new investment and four follow-on investments in two existing portfolio companies, committing total capital of approximately $7.3 million.
Liquidity
As of January 31, 2013, the Company had investments in portfolio companies totaling $416.5 million and investments in cash and cash equivalents of approximately $37.1 million, including restricted cash and cash equivalents of $6.8 million.
Subsequent Quarterly Activity
MVC Capital announced the sale of one of its largest portfolio holdings, Summit Research Labs, Inc. to an affiliate of One Rock Capital Partners, LLC for gross equity proceeds of $63 million, which approximates the fair market value of the asset on our books as of January 31, 2013. Upon completion, the investment will result in an IRR of 31%1, calculated from the original date of purchase in August 2006. As part of the sale, and after receiving repayment of its outstanding $12.1 million loan to Summit, MVC will provide Summit with a new $22 million second lien loan.
Also subsequent to the quarter, MVC issued and sold a total of $80.5 million of senior unsecured notes due in 2023, which closed on February 26, 2013. The first quarterly interest payment on the notes will be made on April 15, 2013 to holders of record on April 1, 2013. Due to the success of the notes offering, MVC repaid its outstanding $50 million term loan on February 26, 2013.
The proceeds from the sale of Summit and the issuance of the unsecured notes will be used for corporate purposes, including, for example, investing in portfolio companies according to our investment objective and strategy, repurchasing MVC common stock pursuant to the share repurchase program adopted by the Company's Board of Directors, funding distributions, and/or funding the activities of our subsidiaries.
Also after the quarter-end, the Company realized the loss of $4.5 million on its Legacy investment, DPHI, Inc. and received a principal payment of $5.0 million from Custom Alloy Corporation.
Dividends
The board of directors declared a dividend of $0.135 per share, or a total of $3.2 million distributed to shareholders for the first quarter of fiscal 2013. The dividend was paid on January 7, 2013 to shareholders of record on December 31, 2012 and will therefore be taxed at 2012 rates. This distribution represents the thirty-first consecutive quarterly dividend paid by the Company since implementing a dividend policy in July of 2005. The dividends issued under current management have resulted in $88.9 million in distributions to the Company's shareholders.
MVC-G
About MVC Capital, Inc.
MVC is a business development company traded on the New York Stock Exchange that provides long-term debt and equity investment capital to fund growth, acquisitions and recapitalizations of companies in a variety of industries. For additional information about MVC, please visit the MVC's website at www.mvccapital.com.
Safe Harbor Statement
The information contained in this press release contains forward-looking statements. These forward-looking statements are subject to the inherent uncertainties in predicting future results and conditions. Certain factors could cause actual results and conditions to differ materially from those projected in these forward-looking statements, and these factors are enumerated in the company's periodic filings with the Securities and Exchange Commission.
The press release contains unaudited financial results. For ease of review, we have excluded the word "approximately" when rounding the results.
[1] The anticipated IRR assumes the full receipt of all escrow proceeds.
| CONSOLIDATED FINANCIAL STATEMENTS | ||
| MVC Capital, Inc. | ||
| Consolidated Balance Sheets | ||
| January 31, | October 31, | |
| 2013 | 2012 | |
| (Unaudited) | ||
| ASSETS | ||
| Assets | ||
| Cash and cash equivalents | $ 30,339,225 | $ 36,160,558 |
| Restricted cash and cash equivalents | 6,790,000 | 6,480,000 |
| Investments at fair value | ||
| Non-control/Non-affiliated investments (cost $53,047,510 and $54,629,419) | 34,656,895 | 34,197,990 |
| Affiliate investments (cost $136,400,934 and $128,521,214) | 189,187,170 | 178,396,856 |
| Control investments (cost $147,494,206 and $149,281,248) | 192,633,030 | 191,575,802 |
| Total investments at fair value (cost $336,942,650 and $332,431,881) | 416,477,095 | 404,170,648 |
| Dividends and interest receivables, net of reserves | 2,811,833 | 4,559,703 |
| Fee and other receivables | 3,729,860 | 3,314,116 |
| Escrow receivables | 494,827 | 991,563 |
| Prepaid expenses | 822,417 | 753,501 |
| Prepaid taxes | 415 | 591 |
| Total assets | $ 461,465,672 | $ 456,430,680 |
| LIABILITIES AND SHAREHOLDERS' EQUITY | ||
| Liabilities | ||
| Term loan | $ 50,000,000 | $ 50,000,000 |
| Provision for incentive compensation (Note 10) | 16,830,099 | 15,655,438 |
| Management fee payable | 2,080,237 | 2,027,571 |
| Management fee payable - Asset Management | 1,286,063 | 1,054,433 |
| Professional fees payable | 612,060 | 767,835 |
| Other accrued expenses and liabilities | 800,964 | 734,501 |
| Portfolio fees payable - Asset Management | 140,467 | 140,293 |
| Consulting fees payable | 52,204 | 34,476 |
| Total liabilities | 71,802,094 | 70,414,547 |
| Shareholders' equity | ||
| Common stock, $0.01 par value; 150,000,000 shares authorized; 23,916,982 and 23,916,982 shares outstanding, respectively | 283,044 | 283,044 |
| Additional paid-in-capital | 425,651,660 | 425,651,660 |
| Accumulated earnings | 65,527,765 | 64,524,665 |
| Dividends paid to stockholders | (95,239,568) | (92,010,775) |
| Accumulated net realized loss | (48,324,522) | (46,401,983) |
| Net unrealized appreciation | 79,534,444 | 71,738,767 |
| Treasury stock, at cost, 4,387,466 and 4,387,466 shares held, respectively | (37,769,245) | (37,769,245) |
| Total shareholders' equity | 389,663,578 | 386,016,133 |
| Total liabilities and shareholders' equity | $ 461,465,672 | $ 456,430,680 |
| Net asset value per share | $ 16.29 | $ 16.14 |
| MVC Capital, Inc. | ||
| Consolidated Statements of Operations | ||
| (Unaudited) | ||
| For the Quarter Ended | For the Quarter Ended | |
| January 31, 2013 | January 31, 2012 | |
| Operating Income: | ||
| Dividend income | ||
| Non-control/Non-affiliated investments | $ 974 | $ 1,580 |
| Affiliate investments | 2,385,748 | 30,249 |
| Control investments | 426,300 | -- |
| Total dividend income | 2,813,022 | 31,829 |
| Payment-in-kind dividend income | ||
| Affiliate investments | 65,484 | 60,497 |
| Total payment-in-kind dividend income | 65,484 | 60,497 |
| Interest income | ||
| Non-control/Non-affiliated investments | 543,884 | 495,471 |
| Affiliate investments | 1,022,952 | 771,642 |
| Control investments | 581,774 | 609,393 |
| Total interest income | 2,148,610 | 1,876,506 |
| Payment-in-kind interest income | ||
| Non-control/Non-affiliated investments | 16,012 | |
| Affiliate investments | 338,675 | 500,024 |
| Control investments | 213,574 | 198,945 |
| Total payment-in-kind interest income | 568,261 | 698,969 |
| Fee income | ||
| Non-control/Non-affiliated investments | 104 | 15,082 |
| Affiliate investments | 236,846 | 93,615 |
| Control investments | 133,800 | 178,073 |
| Total fee income | 370,750 | 486,770 |
| Fee income - Asset Management1 | ||
| Portfolio fees | 140,613 | 83,417 |
| Management Fees | 308,841 | 517,805 |
| Total fee income - Asset Management | 449,454 | 601,222 |
| Other loss | (29,845) | (111,652) |
| Total operating income | 6,385,736 | 3,644,141 |
| Operating Expenses: | ||
| Management fee | 2,080,237 | 2,256,419 |
| Interest and other borrowing costs | 937,043 | 795,124 |
| Management fee - Asset Management1 | 231,631 | 388,353 |
| Legal fees | 136,000 | 175,020 |
| Audit fees | 158,300 | 144,000 |
| Other expenses | 133,553 | 184,203 |
| Consulting fees | 132,251 | 122,251 |
| Portfolio fees - Asset Management1 | 105,460 | 62,563 |
| Directors fees | 103,125 | 87,000 |
| Insurance | 82,770 | 83,613 |
| Administration | 63,872 | 67,356 |
| Public relations fees | 49,500 | 25,500 |
| Printing and postage | 31,000 | 34,200 |
| Incentive compensation (Note 10) | 1,174,661 | (1,937,136) |
| Total operating expenses | 5,419,403 | 2,488,466 |
| Less: Voluntary Expense Waiver by Adviser2 | (37,500) | (37,500) |
| Less: Voluntary Management Fee Waiver by Adviser3 | -- | (58,728) |
| Total waivers | (37,500) | (96,228) |
| Net operating income before taxes | 1,003,833 | 1,251,903 |
| Tax Expenses: | ||
| Current tax expense | 733 | 549 |
| Total tax expense | 733 | 549 |
| Net operating income | 1,003,100 | 1,251,354 |
| Net Realized and Unrealized Gain (Loss) on Investments: | ||
| Net realized (loss) gain on investments | ||
| Non-control/Non-affiliated investments | (1,922,539) | 193,793 |
| Total net realized (loss) gain on investments | (1,922,539) | 193,793 |
| Net change in unrealized appreciation (depreciation) on investments | 7,795,677 | (10,462,974) |
| Net realized and unrealized gain (loss) on investments | 5,873,138 | (10,269,181) |
| Net increase (decrease) in net assets resulting from operations | $ 6,876,238 | $ (9,017,827) |
| Net increase (decrease) in net assets per share resulting from operations | $ 0.29 | $ (0.38) |
| Dividends declared per share | $ 0.135 | $ 0.120 |
| 1These items are related to the management of the MVC Private Equity Fund, L.P. ("PE Fund"). Please see Note 4 "Management" for more information. | ||
| 2 Reflects the quarterly portion of the TTG Advisers' voluntary waiver of $150,000 of expenses for the 2013 and 2012 fiscal years, that the Company would otherwise be obligated to reimburse TTG Advisers under the Advisory Agreement (the "Voluntary Waiver"). Please see Note 9 "Management" for more information. | ||
| 3 Reflects TTG Advisers' voluntary agreement that any assets of the Company invested in exchange-traded funds or the Octagon High Income Cayman Fund Ltd. would not be taken into the calculation of the base management fee due to TTG Advisers under the Advisory Agreement. Please see Note 9 "Management" for more information. | ||